Capitalizing on Business Intel & Portfolio Management For Loan Growth
Over the last 18 months, credit unions have experienced healthy loan growth, and have seen loss and delinquency ratios decline. Is it because credit unions are doing a better job of lending than prior to the recession? One could argue that these simple metrics, while quite popular, do not tell the entire story. So, before we collectively pat ourselves on the back, it’s important that we take a closer look.
While loan originations have been rising, income from loans has been declining and operating costs have been increasing. Industry wide, credit unions are netting less income on these additional loans than on the fewer loans on the books in the past. This is a good indication that credit unions have not made the necessary changes in their operations to make up for low yields, and our competitor’s adoption of technologies that have increased efficiencies. In fact, one of the fastest growing expenses in credit unions over the last 18 months is related to employee compensation. This would be as if Walmart lowered prices across the store, while also adding more staff to assist you. That fact is, this is not a sustainable business model.
By capitalizing on business intelligence and loan portfolio management tools, credit unions can accomplish a number of important things. They’re able to leverage technology by automating processes that currently require a human to complete. In addition, they can pinpoint the profitability of products, so that the right products are being offered to the right people. And finally, they can monitor changes in portfolio risk to ensure that they are taking corrective actions, both accurately and appropriately, to stay in the game.
Increasingly, credit unions are employing Data Scientists, either on staff, or through third party vendors, who have improved the data management practices of the credit union and provided more revealing key metrics that are used to make better, faster business decisions.